D.K. Shivakumar vs Directorate Of Enforcement
2019 Latest Caselaw 5148 Del

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*     IN THE HIGH COURT OF DELHI AT NEW DELHI

                                      Reserved on: 17.10.2019

                                     Pronounced on: 23.10.2019

+     BAIL APPLN. 2484/2019, CRL.M.A. 37260/2019 and CRL.M.A.
      38212/2019

      D.K. SHIVAKUMAR                                        ..... Petitioner
                        Through:     Dr. Abhishek Manu Singhvi, Mr
                                     Rakesh Khanna, Mr Dayan Krishnan,
                                     Sr. Advs. along with Mr Mayank Jain,
                                     Mr Parmatma Singh and Mr Madhur
                                     Jain, Advs.

                        versus

      DIRECTORATE OF ENFORCEMENT                ..... Respondent
                   Through: Mr K.M. Natrajan, ASG, Mr Amit
                            Mahajan, CGSC, Mr Sharath
                            Nambiar, Mr Anmol Chandan, Mr
                            Mohammad Faraz, Mr Kunal Dutt,
                            Ms Mallika Hiremath and Ms Nidhi
                            Chaudhary, Advs. with Mr Saurabh
                            Mehta, Assistant Director

      CORAM:
      HON'BLE MR. JUSTICE SURESH KUMAR KAIT

                                 JUDGMENT

1. Present bail application has been filed under Section 439 Cr.P.C. r/w

Section 65 PMLA, 2002 on behalf of the petitioner in ECIR/04/HQ/2018.

2. The petitioner was arrested on 03.09.2019 and remained in custody of

the Enforcement Directorate, New Delhi, for 15 days and is presently in

judicial custody in Tihar Jail, New Delhi.

3. The instant petition u/s 439 Cr.P.C. is maintainable by virtue of

Section 65 of the PMLA which provides that the provisions of Cr.P.C. shall

apply, in so far as they are not inconsistent with the provision of the PMLA.

Section 65 of the PMLA is reproduced hereunder:-

"65. Code of Criminal Procedure, 1973 to apply.-- Theprovisions of the Code of Criminal Procedure, 1973 (2of 1974) shall apply, insofar as they are notinconsistent with the provisions of this Act, to arrest,search and seizure, attachment, confiscation,investigation, prosecution and all other proceedings under this Act."

4. Brief facts of the case are that a search u/s 132(1) of the Income Tax

Act was conducted on the premises of the Petitioner and other persons on

02.08.2017 in New Delhi and other places. During the course of search, at

the premises of the Petitioner in Delhi at B-2/107, Safdarjung Enclave, New

Delhi, an amount of ₹41,03,600/- was recovered in cash. The Petitioner

explained the source of the aforesaid money having been reflected in the

return of income filed by the Petitioner for A.Y. 2018-19.

5. Thereafter, the Income Tax Department filed 3 complaints against the

Petitioner before the Special Court, Bengaluru, u/s 200 Cr.P.C. alleging

offences under the Income Tax Act. Pursuant thereto, the Income Tax

Department proceeded to grant sanction to prosecute for offences punishable

u/s 276C(1) and 277 of the Income Tax Act and section 120B of I.P.C and

filed a 4th complaint against the Petitioner under section 200 Cr.P.C.

Thereafter, the Special Court, Bengaluru took cognizance and proceeded to

register a complaint against the Petitioner u/s 276C(1) and 277 of the IT Act

and section 120B, 193 and 197 of I.P.C.

6. On 29.08.2018, an ECIR i.e ECIR/04/HQ/2018 was registered by the

Enforcement Directorate, Delhi. Subsequently, on 17.01.2019, the

respondent issued summons to the Petitioner u/s 50 of the Prevention of

Money Laundering Act, 2002 on the basis of ECIR/04/HQ/2018.

7. Thereafter, the Petitioner challenged the summons issued u/s 50 of the

Act, before the High Court of Karnataka at Bengaluru in W.P. No.

6210/2019. The High Court was pleased to dismiss the said writ petition

vide judgment dated 29.08.2019. The respondent issued another summons

u/s 50 of the Act on the same day i.e. 29.08.2019 at 9.40 PM at the residence

of the Petitioner in Bengaluru, to appear before him on the next date i.e.

30.08.2019 at 1PM in Delhi. The Petitioner participated in the said summons

for 4 days (33 hours) continuously and on 03.09.2019, the Petitioner was

arrested by the Enforcement Directorate.

8. The petitioner was admitted on 4 occasions since his arrest in the

RML Hospital complaining of chest pain, high BP and other ailments. Even

after discharge from the hospital the petitioner had grossly fluctuating BP

and was diagnosed with unstable angina. However, on 25.09.2019 the Ld.

Special Court, Rouse Avenue Court Complex, rejected the bail application

of the present Petitioner.

9. Dr. Abhishek Manu Singhvi, learned Sr. Advocate appearing on

behalf of the petitioner submitted, the offences under Section 276C(1), 277

of the Income Tax Act and Section 193, 199 r.w.s. 120B IPC that have been

alleged against the Petitioner do not constitute a predicate offence as per the

schedule given in the PML Act. The offence contained in Section 120B IPC

alleged against the present Petitioner cannot be used as a standalone

predicate offence in the absence of any other schedule offence under the IPC

or any other penal statute to make out a case against the Petitioner of money

laundering under the PML Act. Moreover, there is no conspiracy to commit

a 'Schedule Offence' and therefore, there is no question of invoking the

provisions of PML Act on the basis of Section 120B IPC alone.

Furthermore, the High Court of Karnataka in its judgment dated 29.08.2019

in W.P. No. 6210/2019, left the question w.r.t Section 120B open as regards

the question of commission of criminal conspiracy to commit as scheduled

offence under the PML Act. However, a conjoint reading of section 2(l)(u),

2(l)(x),2(l)(y) and 3 of the Prevention of Money Laundering Act,2002,

reveals that the offence of money laundering, and the concept of proceeds of

crime is necessarily relatable to the existence of a schedule offence.

10. Dr. Singhvi, submitted that the concept of conspiracy is not something

unknown to criminal law. It is a settled proposition that conspiracy requires

an offence and there cannot be a conspiracy for conspiracy, however, it

should lead to an illegal act or act which is not illegal to be done by illegal

means. While there is no quarrel with the proposition that Section 120B is a

substantive offence, but it doesn't mean that without an existence of another

offence or an agreement to conduct another offence, the offence of

conspiracy can be said to be made out. In other words, a person cannot

conspire to conspire. Section 120B is substantive for the purposes of

punishment which is clear from Section 120-B (1) which says that

punishment will be done in the same manner as the abetment of 'such

offence'. Further, provides that whoever is a party to a criminal conspiracy

other than a criminal conspiracy to commit an offence punishable as set out

in Section 120-B(l) shall be punished with imprisonment of either

description for a term not exceeding six months.

11. Learned senior counsel for petitioner, thus, further argued as under:-

i) In the context of Prevention of Money Laundering Act,2002, the

offence has to be read as Scheduled Offence.

(ii) An abettor has to be an abettor of an offence, and in the context of

the Prevention of Money Laundering Act,2002, a scheduled offence.

Reference in this regard may be made to Section 108, Indian Penal

Code, 1860.

(iii) If it is an admitted position that none of the offences are

scheduled offences, even if recourse is made to Section 120 -B (2)

then the maximum punishment is 6months. Thus, if the case of the ED

is taken as correct, that in the context of Section 120 -B it is a

substantive offence without an offence, then only 6 months

imprisonment is awardable the offence is bailable.

(iv) If there is no offence, that is a scheduled offence, there can be no

proceeds of crime and at the highest if one accepts that 120B(2) is

stand alone it will result in bail being automatic as the same is a

bailable offence for that the Petitioner has been discharged by the

Special Court, Bengaluru vide order dated 28.02.2019 in 3 complaints

filed by the Income Tax Department, pursuant to the aforesaid search

dated 02.08.2017. No proceedings under the PML Act much less an

arrest could have been initiated in the facts of the present case in as

much as when the 4th prosecution complaint filed u/s 200 Cr.P.C. by

the Income Tax Department alleging only predicate offences u/s120B

IPC, has been stayed by the High Court of Karnataka vide order dated

20.08.2019.

12. Learned senior counsel further argued that the twin conditions

mentioned in Section 45 of the PML Act continue to be struck down as

being unconstitutional in view of the judgment of the Apex Court in the

case of Nikesh Tarachand Shah vs. Union of India(2018) 11 SCC 1.

The amendment in Section 45 by the Finance Act 2018 is only with

respect to substituting the term 'offence punishable for 3 years' with

'offence under this Act'. The said amendment does not revive the twin

conditions already struck down by the aforesaid judgment. Reliance is

placed upon the judgment of Delhi High Court in the case of Upendra

Rai vs. Directorate of Enforcement (BailApplication No. 249/2019).

13. Since the twin conditions for bail in section 45 of the PML Act have

been struck down by the Hon'ble Supreme Court and the same are neither

revived nor resurrected by the Amending Act therefore, as of today there is

no rigor of said two conditions under original Section 45(l)(ii) of the PML

Act for releasing the Petitioner on bail. The provisions of section 439 of

Cr.P.C and the conditions therein will only apply in the case of the Petitioner

for grant of bail.

14. Dr. Singhvi also submitted that the Petitioner has been elected seven

times as a member of Legislative Assembly, State of Karnataka and is

former minister of energy, water and power. The Petitioner has deep roots in

the society and admittedly, is not a flight risk. Reliance is placed upon the

judgment in the case of R.Vasudevan vs. CBI, BAIL APPLICATION NO.

2381/2009, wherein this High Court considering the high position and deep

roots of the accused, granted bail. The present petitioner has no criminal

antecedents and has never been convicted for any cognizable offence. Thus,

there is no question of repeating the offence in any manner, whatsoever.

There is no allegation in this case of tampering of evidence or influencing

the witnesses.

15. Moreover, the offences punishable under Section 276C (1)and Section

277 of the Income Tax Act, 1961 are compoundable offences u/s 279(2) of

the Act which shows that the offences are not serious in nature. The Delhi

High Court in the case of Sitaram Aggarwal vs.Customs, (2005) 79 DRJ

554 held that, in case of compoundable offences, bail should be granted.

16. The Hon'ble Supreme Court in the case of Dataram Singh vs. State of

Uttar Pradesh &Ann, (2018) 3 SCC 22 held as under:

"i. A fundamental postulate of criminal jurisprudence is the presumption of innocence, meaning thereby that a person is believed to be innocent until found guilty. However, there are instances in our criminal law where a reverse onus has been placed on an accused with regard to some specific offences but that is another matter and does not detract from the fundamental postulate in respect of other offences. Yet another important facet of our criminal jurisprudence is that the grant of bail is the general rule and putting a person in jail or in a prison or in a correction home (whichever expression one may wish to use) is an exception. Unfortunately, some of these basic principles appear to have been lost sight of with the result that more and more persons are being incarcerated and for longer periods. This does not do any good to our criminal jurisprudence or to our society.

17. The Hon'ble Supreme Court in "Arnesh Kumar Versus State of

Bihar (2014) 8 SCC 273" which makes it mandatory that in any case where

the offence is punishable with imprisonment for a term which may extend to

7 years, the accused may not be automatically arrested and the Magistrate

may not authorize the detention casually and mechanically.

18. In addition to above all discussed, undisputedly, the Petitioner has

been hospitalized 4 times in the past 3 weeks and has been diagnosed with

hypertension, diabetes, hypothyroidism, electrolyte imbalance. The

Petitioner was kept in Cardiac Care Unit (CCU) and as the Petitioner

complained of chest pain, Angiography was also performed on the Petitioner

on18.09.2019.

19. Moreover, the proviso to Section 45 of the PML Act, provides that in

case of sick person, bail should be granted to the person arrested.

20. On the other hand, Mr. Natrajan, learned Additional Solicitor General

of India submitted that the present case involves the commission of grave

economic offence of laundering of the proceeds of crime by the petitioner

and his associates through a series of transactions and projecting the ill

gotten proceeds as untainted.

21. The Income Tax Investigation Directorate of Karnataka has conducted

searches on the petitioner and his associates on 02.08.2017 at various places

which led to seizure of (cash, loose sheets, diary & several incriminating

material connected with criminal conspiracy) from premises under control of

the petitioner and his associates. The scrutiny of transactions recorded in

incriminating documents revealed unaccounted cash transactions and its

laundering running into at least ₹143 Crores. During course of search,

statement of several persons including petitioner and his associates were

recorded by the Income Tax Department.

Details of cash seized during Search

S. No    Name and address of the premises      Amount of
                                               cash seized
                                               Rs.

a.       Flat No.0l, Karnataka Govt. Staff     12,44,900
         Quarters, Sector-6, R.K. Puram New
         Delhi.

b.       No. 17, B-4,                          1,37,36,500
         Safdarjung Enclave, New Delhi.

c.       No. 107, B-2,                         41,03,600
         Safdarjung Enclave, New Delhi.

d.       No.201,B-5,
         Safdarjung Enclave, New Delhi.
         a) From the room of Sh. D.K.          6,61,26,000
         Shivakumar
         b) From the room of Sh. Sunil Kumar      7,58,100
         Sharma

         Total                                 6,68,84,100

         Grand Total Rs                        8,59,69,100

22. Further submitted, the scrutiny of transactions recorded and

incriminating documents revealed that illicit and unaccounted cash at least

₹143 crores were generated by the petitioner in criminal conspiracy with his

associates. Out of said generated amount, a small part of ₹8,59,69,100/- was

found and seized during search. Sh. Anjaneya Hanumanthaiah is the person

who manages and maintains the tainted cash of petitioner with the active

participation/connivance of Sh. Rajendra N., Sh. Sunil Kumar Sharma, Sh.

Sachin Narayan and others. It is also seen that the properties where the

search operations were carried out either belong to petitioner or his

associates and were in active control of the petitioner. The persons who have

been found to be in possession of tainted cash have stated that the cash

belongs to the petitioner.

23. Learned Additional Solicitor General further submitted that during the

investigation it has been found that petitioner also transacted with one Sh.

Ajay Khanna, designated partner of AN Build prop LLP in New Delhi.

During the course of search proceedings by the Income Tax Department at

the residence of Sh. Anjaneya Hanumanthaiah on 02.08.2017, it was found

that the total tainted cash transaction in relation to the property bought from

Ajay Khanna was Rs.4.0 Crores. The said cash was not shown or accounted.

24. It is argued by Mr. Natrajan, learned ASG that in furtherance of the

summons issued to the petitioner for recording his statement U/s 50(2) of the

PMLA,2002 for 30.08.19, 31.08.19,02.09.19 and 03.09.19 he appeared in

the office of the ED wherein his statement has been recorded on 30.08.19,

31.08.19, 02.09.19 and 03.09.19. However, he has not explained the illegal

generation of money found during search as well as deposited in several

bank accounts and has been evasive. The transactions as recorded in the

incriminating documents recovered indicate that he has generated large sums

of money and looking into the position he has been holding as Minister for

several times in the State Government of Karnataka and using some

Government Servants and he is authority for furtherance of his conspiracy

for both generation of huge amount of money through misuse of his official

position and business relations is not ruled out as the statement given by

various persons have already emphasized that all the money they were

handling belonged to the petitioner and all his family members like mother,

wife, daughter have shown phenomenal growth in assets in the period when

he was holding high position which has not come out of legitimate business

which he is claiming. The petitioner has directly as well as indirectly been

involved in the process, concealment, possession, acquisition and use of the

proceeds of crime which was directly/indirectly derived as a result of

criminal activity relating to schedule offence.

25. Further submitted, it has emerged from investigation conducted so far

that he abused his official position to generate illegal money as is also

evident from the increase in assets of the petitioner and his family members

which are not in tune with the disclosed income of the family.

26. As per the information available at this point of time, petitioner and

his family members are maintaining around 317bank accounts wherein

deposits and transfers have been made, also it is evident from the details of

deposits that during the period huge cash has been deposited/ transferred in

the bank and the amount of transactions is varying every year

disproportionately. Some part of the tainted cash was claimed as agricultural

income and was directly invested in immovable properties without routing

through bank accounts where other part of the tainted cash deposited/

transferred in Bank accounts of distant relatives and associate was

transferred to close family relatives like mother, father, wife and daughter of

petitioner.

27. It is also submitted that the statement of the petitioner was recorded

12 times by the Investigating Agency from 30-08-2019 till 12-09-2019. In

all these statements, the petitioner did not mention that there was

documentary evidence for the agricultural income earned by his father,

which is now being used to explain the source of investment in properties.

However, in the instant bail application, the petitioner has mentioned about a

certificate from the Tehsildar to justify his father's agricultural income. It

prima facie appears to have been created as an after thought as there is

neither any date of issuance of the certificate nor Tehsildar has recorded the

basic details like landholding, crops grown etc. for certifying the agricultural

income to the tune of Rs.25 lacs. This fact is under investigation by the

Directorate.

28. It is submitted that the residence of Sh. Anjaneya, an Assistant

Liaison Officer in Govt. of Karnataka and a close associate of the petitioner,

was subjected to search u/s 17 of PMLA, 2002and two laptops & mobile

phone belonging to the petitioner were recovered from his house. He has

tried to hide the evidences by placing his personal laptops in other person's

custody. These laptops have been sent for forensic examination.

29. It is further submitted that the petitioner has held high offices of

Minister. From his means, position and standing there is every likelihood

that he would employ every means to frustrate the investigations against

him. Furthermore, his mere presence at large would intimidate the witnesses.

30. It is submitted that means, position and standing of the petitioner is an

extremely vital factor to be considered while granting bail to the accused.

Furthermore, it is also well settled that if the accused is of such character

that his mere presence at large would intimidate the witnesses or if there is

material to show that he will use his liberty to subvert justice or tamper with

the evidence, then bail has to be refused.

31. Heard learned counsel for the parties and perused material on record.

32. It is not in dispute that the petitioner was discharged by the Special

Court, Bengaluru in 3 out of 4 complaints vide order dated 28.02.2019.

however, the application seeking discharge in the 4th complaint was

dismissed by the Special Court, Bengaluru, vide order dated 25.06.2019.

The petitioner had challenged the said order in Revision Petition No.

955/2019 filed before the High Court of Karnataka which granted stay of

further proceedings vide order dated 20.08.2019 in the said 4th complaint

case pending before the Special Court, Bengaluru.

33. It is also not in dispute that the offences under Section 276C, 277 of

the Income Tax Act alleged against the petitioner are compoundable

offences and the only 'Scheduled Offence' invoked against the petitioner is

Section 120 B IPC.

34. It is also not in dispute that Anjaneya Hanumanthaiah who challenged

order of the High Court of Karnataka in WP(Crl.) No. 281/2019 wherein the

Hon'ble Supreme Court issued notice and the Hon'ble Court directed the

respondents that no coercive action shall be taken against the petitioners.

However, I am not giving any opinion on the merit of case of the

prosecution.

35. While dealing with the bail application, it is not in dispute that three

factors have to be seen viz. i) flight risk, ii) tampering evidence iii)

influencing witnesses.

36. Regarding the flight risk, neither argued by learned Additional

Solicitor General nor placed any material on record, therefore, flight risk of

the petition is ruled out.

37. Regarding tampering with the evidence, it is not in dispute that the

documents relating to the present case is in the custody of the prosecuting

agency, Government of India and the Court. Moreover, presently, the

petitioner is not in power except he is a Member of Legislative Assembly.

Therefore, in my considered view, there is no chance of the petitioner to

tamper with the evidence.

38. On the issue of influencing the prosecution witnesses, the respondent

has not placed any record to establish that either the petitioner or his family

members or associates ever tried to contact any of the witnesses not to

disclose any information regarding money earned by him for self and family

members or associates. Moreover, petitioner has been examined extensively.

All the 14 witnesses have already been examined.

39. He was arrested on 3rd September, 2019 and remained 15 days in the

custody of respondent and thereafter in judicial custody. He is no more

required for investigation or interrogation by the prosecution.

40. Moreover, he remained 4 days in Hospital and that in ICU wherein

Angiography was also performed on the petitioner.

41. In view of the discussion above, I am of the considered opinion, the

petitioner is entitled for bail on merits and medical grounds as well.

Accordingly, the petitioner shall be released on bail with conditions as

under:-

(i). On furnishing personal bond for an amount of Rs. 25 lacs with two

sureties of the like amount to the satisfaction of the Trial Court.

(ii). He shall not leave the country without permission of Court.

(iii). Also shall make himself available for investigation, if required by the

prosecuting agency.

(iv). He shall not influence the prosecution witnesses directly or remotely.

42. Accordingly, present bail application is allowed.

CRL.M.A. 37260/2019 and CRL.M.A. 38212/2019

43. In view of the order passed in the present bail application, these

applications have been rendered infructuous and are accordingly, disposed

of.

44. A copy of this judgment be given dasti to counsel for the parties, under

signatures of the Court Master.

(SURESH KUMAR KAIT) JUDGE OCTOBER 23, 2019 Ms/p